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21 October, 22:19

Dimeback, Inc., is obligated to pay its creditors $7,400 during the year. Required: (a) What is the market value of the shareholders' equity if assets have a market value of $10,800? (b) What if assets equal $6,500?

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  1. 21 October, 22:50
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    a. $3,400

    b. $0

    Explanation:

    As we know

    Total assets = Total liabilities + owners equity

    a. In the first case

    The shareholder equity would be

    = Total assets - total liabilities

    = $10,800 - $7,400

    = $3,400

    b. In the first case, the shareholder equity would be zero as it should not be negative. The negative value would be

    = Total assets - total liabilities

    = $6,500 - $7,400

    = - $900

    So it would be zero
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